Jammu & Kashmir Bank Ltd. · NSE:J&KBANK
Jammu & Kashmir Bank — Investor Presentation (August 2008)
56 slides from Jammu & Kashmir Bank's investor presentation, Aug 13, 2008
Slide 1: Investor Meet: A contra-cyclical strategy
INVESTOR MEET A contra-cyclical strategy Aug – 13th & 14th, 2008 Mumbai
Slide 2: Structure of Presentation
Structure of Presentation • Profile of the Bank • Plan & Strategy of Change • Performance and Outcome • Potential of Growth • Perspective and Macro-economic Context 2
Slide 3: Basic facts
Basic facts ¾ Incorporated in 1938 as a limited liability company ¾ Listed on National stock exchange (NSE) and Bombay stock exchange (BSE) ¾ 53 per cent owned by J&K Government ¾ Rated “P1 +” by Standard and Poor- CRISIL: highest degree of safety ¾ Four decades of uninterrupted profitability and di
Slide 4: One of a Kind
One of a Kind • Private sector bank despite government’s majority holding • Sole banker and lender of last resort to the Government of J & K • Only private sector bank designated as RBI’s agent for banking business • Carries out banking business of the central government • Collects taxes for Central
Slide 5: Shareholding Pattern
Shareholding Pattern As on May 2, 2008 5
Slide 6: Infrastructure
Infrastructure • Fastest growing bank with 565 branches • 98 per cent business computerized • Anywhere, Tele-banking and SWIFT • Internet, SMS and Mobile Banking • Globally connected ATM network • Mobile ATM Service • Global Access Debit & Credit Cards • Live on RTGS System of RBI 6
Slide 7: Other Services
Other Services: • Insurance joint venture with MetLife International • Distributor of: • Life Insurance products of MetLife • Distributorship of Bajaj Allianz General Insurance • Providing Depository Services • Offering Stock Broking Services • Collection Agent for utility services 7
Slide 8: Plan
Plan 8
Slide 9: New business strategy
New business strategy • Two legged business model: – Increase lending in J&K, which is • high margin, low volume – target niche lending in rest of the country, to • Improve margins and build volumes – Universal Bank in J&K – Specialist bank in rest of the country 9
Slide 10: New Strategy: Analytics
New Strategy : Analytics • Operating in a “closed” economy: • limited Leakages • lending akin to reserve money • More lending within the state: • more incomes are generated • low cost saving deposits • Virtuous cycle of lending and saving • liquidity remains within the bank’s system, giving: • Risin
Slide 11: Operational aspects
Operational aspects • A change in composition of advances – In terms of geography – from ROI to J&K – In terms of asset types – from low margin to high margin • A greater focus on liability management – Increase low cost retail deposits – Increase the maturity structure • A more focused balance shee
Slide 12: Carving a niche, nationally
Carving a niche, nationally • Nationally, lending in consortium to large corporates – Reduces margins • To improve margins focus on: • Under-serviced areas with high turnover • Specialised sectoral lending • Specialist branch chain – leather, grains, spices • Re-pricing • A universal bank in J&K and
Slide 13: New business initiatives
New business initiatives • Innovative financial products • Monetizing the Bank’s branch network • Third party product distribution • Investment banking • Venture capital financing • Channel financing 13
Slide 14: New financial products
New financial products • Mismatch between growth sources and credit supply • High growth and yield areas under-serviced in terms of credit • Major sectors like horticulture still financed informally • Artisan economy not financed 14
Slide 15: Third party products
Third party products • Make branch network a distribution channel for financial products • Reduce incentive for major banks to enter J&K • Beef up non-interest incomes • Reduce income volatility • Make assets sweat harder • Improve business per branch per person 15
Slide 16: Investment banking
Investment banking • Leveraging our core competence of domain and geographical expertise, and having • J&K Government a captive client – State Government investing $240 billion in power over four years – Mandated to take Power Development Corporation public 16
Slide 17: Organizational restructuring
Organizational restructuring • Aligned people strategy to business strategy • New business processes aligned to changing banking environment • Performance based variable pay introduced • Business centric organisational structure created • Brand Strategist and visual makeover done • Re-designing its
Slide 18: Performance
Performance ~~ J&K Bank 18
Slide 19: Better liability structure: CASA
Better liability structure : CASA 45 40 35 30 25 20 2005-2006 2006-2007 2007-2008 J une, 2008 19
Slide 20: Cost of Deposits: Declining
Cost of Deposits : Declining 7 6 5 4 3 2 1 0 2005-2006 2006-2007 2007-2008 J une, 2008 20
Slide 21: Advances Yield: Increasing
Advances Yield : Increasing 12 10 8 6 4 2 0 2005-2006 2006-2007 2007-2008 J une, 2008 21
Slide 22: Cost to income ratio: Sharp drop
Cost to income ratio : Sharp drop 46 44 42 40 38 36 34 2005-2006 2006-2007 2007-2008 J une, 2008 22
Slide 23: NIMs: Rising
NIIMs : Rising 3.2 3 2.8 2.6 2.4 2.2 2 2005-2006 2006-2007 2007-2008 J un-08 23
Slide 24: Return on assets: Constant rise
Return on assets : Constant rise 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2005-2006 2006-2007 2007-2008 J un-08 24
Slide 25: Return on equity
Return on equity 18 16 14 12 10 8 6 4 2005-2006 2006-2007 2007-2008 J un-08 25
Slide 26: Earning per share
Earning per share 85 65 45 25 5 2005-2006 2006-2007 2007-2008 Jun-08 26
Slide 27: NPA coverage
NPA coverage 80 70 60 50 40 30 20 10 0 Q4-0405 Q1-0506 Q2-0506 Q3-0506 Q4-0506 Q1-0607 Q2-0607 Q3-0607 Q4-0607 Q1-0708 Q2-0708 Q3-0708 Q4-0708 Q1-0809 27
Slide 28: Financial: Valuations ratios
Financial : Valuations ratios 2 0 0 5 -2 0 0 6 2 0 0 6 -2 0 0 7 2 0 0 7 -2 0 0 8 Ea r ning pe r Sha r e (a nnua liz e d) 3 6 .4 8 5 6 .6 2 7 4 .2 6 Ne t Asse t Va lue 3 7 1.2 4 14 .3 6 4 7 6 .2 8 Adjuste d Book Va lue 3 4 3 .4 3 3 7 4 .4 3 4 3 4 .3 Pr ic e to book va lue r a tio 1.2 3 1.7 3 1.3 5 Pr
Slide 29: Profitability Ratios
Profitability Ratios 2 0 0 5 -2 0 0 6 2 0 0 6 -2 0 0 7 2007-2008 Ne t Inter est Mar gins (% ) 2 .6 8 % 2 .9 7 % 2.95% Inter e st Spr e a ds (% ) 2 .6 1% 2 .7 9 % 2.64% Yield on Adva nc e s (Av) (% )(a nnualiz ed) 8 .4 8 % 8 .5 8 % 10.44% Yield on Investme nts (Av) (% )(Annua lize d) 6 .2 2 % 6 .2 0
Slide 30: Asset Quality
Asset Quality: 2 0 0 5 -2 0 0 6 2 0 0 6 -2 0 0 7 2 0 0 7 -2 0 0 8 Gros s NP As ( Rs . in Mns ) 370 2 5 0 18 4852 Ne t NP As ( Rs . in Mns ) 1339 19 36 20 36 Gros s NP A Ra t io ( % ) 2.5 2% 2.8 9 % 2.5 3% Ne t NP A Ra t io (% ) 0 .9 2% 1.13% 1.0 8 % NP A Cove ra ge Ra t io (% ) 6 3.6 4 % 6 1.4 3% 5
Slide 31: Operating ratios
Operating ratios: 2 0 0 5 -2 0 0 6 2 0 0 6 -2 0 0 7 2007-2008 Oper a ting Expe nse s to AWF (% ) 1.3 6 % 1.3 5 % 1.31% (a nnua liz ed) Oper a ting Expe nse s to Tota l Income (% ) 19 .0 0 % 18 .0 8 % 15.06% Oper a ting e xpense s to other income (% ) 3 11% 2 3 2 .4 8 % 164.73% Staff Cost to Total In
Slide 32: Efficiency Ratios
Efficiency Ratios: 2 0 0 5 -2 0 0 6 2 0 0 6 -2 0 0 7 2007-2008 Cos t t o Incom e Ra t io (% ) 4 4 .5 7% 4 0 .13% 38.24% CD Ra t io (% ) 6 1.6 7% 6 7.79 % 66.04% CAS A Ra t io (% ) 34 .17% 37.0 2% 39.16% Bus ine s s pe r Em ploye e (Rs . In Mns ) 5 5 .5 7 6 1.74 62.82 Ne t P rofit pe r Em ploye e (Rs
Slide 33: Perspective
Perspective ~~ J&K Bank 33
Slide 34: J&K Economy: Basic Indicators
J&K Economy : Basic Indicators Total Population 1.01 crore Area 1,01,387 sq kms Density 100 per sq km ( 325 ) Per capita Income Rs 16,190 (Rs 23,222) Population BPL 3.48% ( 26.10%) Literacy 55.52% ( 64.84%) Unemployment rate : 4.21 ( 3.09) 34
Slide 35: Economic Infrastructure
Economic Infrastructure Road Length (Kms/100SqKm) 35.71 (104.64) Telephones/100 of population 7.76 (13.57) Post offices/Lakh of Population 15 (14) Bank offices per 100 SqKm 0.85 (2.18) Average population per bank office 13000 (16000) Hospital Beds per lakh 111 Doctors per lakh 48 35
Slide 36: Inter regional variations
Inter regional variations • Bank Branches/Area – Leh : 1 branch per 3000 sq km – Jammu : 1 branch per 15 kms • Bank branches /Population – Kupwara : 20,000 people per branch – Leh : 1000 people per branch • CD Ratio – Kargil : 11.41% – Srinagar : 81.99% • Per Capita Income – Srinagar : Rs 17896 – Ku
Slide 37: State Income
State Income: 22000 20530 20000 18009 18000 16597 16000 13824 14000 12182 12000 10000 8858 8000 6973 5500 6000 4000 1996-97 1998-99 2004-05 2005-06 2000-01 2002-03 1994-95 37
Slide 38: Economic Growth: Trends
19 3.5 4.5 5.5 3 4 5 6 93 - 94 19 94 - 95 19 95 -9 6 19 96 -9 7 19 97 -9 8 19 98 -9 9 19 99 -0 0 20 00 -0 1 20 01 -0 2 20 Economic Growth: Trends 02 -0 3 20 03 -0 4 20 04 -0 5 20 05 -0 6 38
Slide 39: Credit gap
Credit gap • J&K accounts for 0.70 per cent of national GDP •Yet, it absorbs only 0.30 per cent of total national credit • Productive sectors of the economy account for less than 5 per cent of the credit disbursed in J&K •Comparable national average is 30 per cent • J&K accounts for 1 per cent of In
Slide 40: Reconstruction Impact
Reconstruction Impact B. Normalcy plus economic reconstruction - Economic growth accelerates due to reconstruction of economy through : * autonomous investments in physical infrastructure * Induced investment in production activity Example: Acceleration of Economic growth: ¾ State SDP growth : 13.5
Slide 41: Peace through Economic Reconstruction
Peace through Economic Reconstruction ¾ Prime Minister’s Reconstruction Plan: ¾Timeframe : 2005-06 to 2008-09 ¾Size : Rs 240 bn ¾Focus areas: Power, Roads, Hospitals and Tourist Infrastructure ¾Asian Development Bank’s Multi-sectoral Investment Plan: ¾Timeframe : 2005-06 to 2009-10 ¾Size : Rs 20 bn
Slide 42: Staggering Numbers
Staggering Numbers ¾ Prime Minister’s Reconstruction Plan: Rs 240 bn ¾Asian Development Bank’s Multi-sectoral Investment: Rs 20 bn ¾Japanese Bank of Industrial Cooperation: Rs 37 bn ¾In addition to this, ¾Normal spending plans: Rs 45 bn p.a ¾ Three year autonomous expenditure of: Rs 340 bn+ ¾All thi
Slide 43: Private Investment: Picking Up
Private Investment :Picking Up ¾ Quantity: ¾Investment in the SME sector till July 2005 : Rs 35 bn ¾Proposals in the pipeline: Rs 120 bn ¾The flow of funds is in the range of : Rs 500 bn ¾Quality: ¾Top notch Indian corporates: ¾ Bharti ¾ Reliance (ADA) Infocom ¾ Mahindra and Mahindra ¾ Lupin Laborat
Slide 44: Catching Up
Catching Up From current levels to “Catch up” with national average: • Of personal finance, credit has to triple • Of credit intensity, credit in J&K has to increase five-fold But by then, • National average would have risen…. • Game of catching up will drive and sustain volumes and asset growth of
Slide 45: Bottom line impact
Bottom line impact Per capita Income levels rise: - savings rate increases; - financial savings increase proportionally Capacity for servicing personal loans will increase With such a massive investment dose: - inflation likely to increase …. - real rate of interest will decline… - making mortgages
Slide 46: Trickle down impact
Trickle down impact Crowding in of investment: - public investment in infrastructure will induces private investment with backward and forward linkages - Credit demand for financing SME’s and ancillaries associated with infrastructural projects picks up - Credit demand for induced demand : financing
Slide 47: To sum up
To sum up • New strategy has started paying off • Consolidation Phase will now give way to margin enhancing growth phase, led by – High growth of J&K – Reconstruction – Specialised lending • Better financial intermediation through innovation • Raising J&K level of credit absorption to national level
Slide 48: Contra cyclical in 2008-09
Contra cyclical in 2008-09 • Expansion • Aggressive credit growth • Improved liability management • Productivity enhancements – Labour – Capital 48
Slide 49: Macroeconomic Context
Macroeconomic Context • Stage set for a moderate pace of loan growth in 2008-2009 • Expected range of growth is 15-20 per cent. • Monetary policy will be contractionary • Liquidity scenario will be tight but with oil bonds impact of hikes will be less 49
Slide 50: Macroeconomic Outlook
Macroeconomic Outlook • Negative : • Overheated • Inflationary spiral • Correction will not be sharp despite an adverse monetary policy, • Economy should expand by 7 percent, • Inflation will show signs of moderation in January 50
Slide 51: Global Growth
Global Growth • Asia expected to grow at 5.5 percent in fiscal 2008-09, • Expansion of 8.3 percent in 2006, • India will continue be an out-performer • This will impact FII and FDI inflows 51
Slide 52: Global Growth: monetary impact
Global Growth: monetary impact • Higher relative growth prospect will continue to bring high capital inflow • Currency pressure. • Most important macroeconomic variable for management and tracking in 2008-2009 is exchange rate 52
Slide 53: Monetary Policy
Monetary Policy • Interest rates has peaked. • Worse case scenario is another 50 bps through the last quarter • Some levers of liquidity control will be tightened • Further credit slowdown will happen • Cost of deposits will rise 53
Slide 54: Banking Sector Outlook
Banking Sector Outlook • Increase in risk weightage: – RBI may further tightened norms due to continued high asset prices. – risk weightage for loans to the commercial real estate sector from 100% to 125%. – investment in mortgage-backed-securities (MBS) will attract risk weightage of 125%. – Risk w
Slide 55: Recap
Recap • J&K Bank will grow its business much faster • At rising margins and lower costs, even as • Economic growth in India declines marginally and • Banking sector slows down with cautious outlook on performance 55
Slide 56: Thank you!
Thank you! © usK Bank
Jammu & Kashmir Bank — Investor Presentation (August 2008) on 6ix